Just in case you've missed this over the last day or so, it seems there's no end in sight to the Infinity Ward drama. It has now emerged that 38 former and current staff are suing Activision for breach of contract.

Through their attorneys, the so-called "Infinity Ward Employee Group" has claimed that the publisher withheld royalties in order to ensure development staff stayed on to complete Modern Warfare 3. Last month, studio heads Jason West and Vince Zampella were sacked for "insubordination" and later set up their own studio, Respawn Entertainment. The duo has filed its own $36m lawsuit against Activision. Since then, a reported 26 staff have left Infinity Ward, some of whom have gone on to join Respawn.

The legal documents were unearthed by US news site G4TV, which quotes attorney Bruce Isaacs:

"Activision owes my clients approximately $75 million to $125 million dollars. Activision has withheld most of the money to force many of my people to stay, some against their will, so that they would finish the delivery of Modern Warfare 3. That is not what they wanted to do. Many of them. My clients' entitled to their money. Activision has no right to withhold their money -- our money."

The action focuses on royalties apparently due to the employees after the completion of Modern Warfare 2, which has so far generated over $1bn in revenues for Activision. The game has recently been recognised by Guinness World Records as the most successful entertainment launch in history. The group claims that by delivering the project on time, they met the stipulations behind the delivery of royalty payments, but that these amounts were at least partially withheld by the publisher.

Activision has provided a terse response to this latest escalation:

"Activision believes the action is without merit," a company spokesman said in response to the suit. "Activision retains the discretion to determine the amount and the schedule of bonus payments for [Modern Warfare 2] and has acted consistent with its rights and the law at all times. We look forward to getting judicial confirmation that our position is right."

The publisher has been desperate to claw back the PR initiative over recent weeks. In the immediate aftermath of the West and Zampella dismissal, the company announced the formation of a new business unit to oversee the Call of Duty brand, and confirmed that a new CoD-branded action adventure title was in development at the newly formed Sledgehammer Games studio. Two weeks ago, Activision COO Thomas Tippl claimed that Infinity Ward was definitely working on a Call of Duty title. However, it would seem that tensions between publisher and developer over the future of the studio have been bubbling for some time – back in January, insiders apparently told news site VG247, that Infinity Ward wouldn't be working on Modern Warfare 3, and that the studio was creating an entirely new IP.

It would seem at the heart of all this is that old bugbear creative freedom. Perhaps the Infinity Ward staffers were keen to move way from a franchise they'd been working on for almost ten years. Activision, meanwhile, must have been equally keen to keep them plugging away at what is by far the most successful brand in its portfolio. Now, the studio looks to be irreparably damaged: a quarter of the Modern Warfare dev team gone, a third of that team suing their publisher, the creative leads of that team working at a brand new studio. Analysts and Activision shareholders alike will no doubt be wondering how this could all have been handled differently...